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DLF rates go south,rivals may follow
The Economic Times, February 25, 2009, Page 1
Prices Cut 20-30%, Customers Who Bought At Higher Rates To Get Refunds
Our Bureaus NEW DELHI I CHENNAI
THE COUNTRY’S largest property developer, DLF, has cut home prices by up to a third at its ongoing projects in Chennai and Bangalore, triggering hopes that other big real estate firms will follow its lead to try and boost sagging demand.
Customers who have bought homes at its Garden City project in Chennai and Westend Heights in Bangalore at higher rates will be eligible for a refund, a DLF official said, and indicated that a drop in prices may be in the offing in other cities too.
Rates for the Garden City project—the company has already sold 2,000 of the total 3,500 apartments there—have been cut by 17% to Rs 2,650 per sq ft. DLF has slashed prices by 32% to Rs 1,850 per sq ft for the Bangalore project, where it is building 2,000 homes.
A DLF official said the decision to reduce prices was in response to the changed conditions in the real estate sector because of “unprecedented global events and changes in raw material costs”.
Already, many buyers are said to be queuing up to consider DLF’s offer in Chennai. While one group of buyers claims to have mobilised 600 exit letters, DLF authorities maintain that it is only between 150 and 200 members.
Several analysts have been saying a 30-35% decline in prices is essential to spur demand. Home buying has fallen off sharply since the middle of 2008 because of high property prices and finance costs as well as uncertainties over job security. As sales dried up, credit became expensive and private equity funds vanished, property companies ran into a severe cash crunch. Realty firms have also been under pressure from banks and the government to reduce prices.
While developers have been slow in reacting to the changes, DLF’s decision has the potential to influence the entire market.
“DLF’s bold move will prompt other companies as well to reduce prices,” said Anshul Jain, CEO of property consultancy DTZ India.
DLF’s closest rival, Unitech, which hasn’t launched any new project in the recent past, says it is “still watching the market”.
R Nagaraju, the head of strategy and planning, said the company’s new launches will definitely be at lower price points.
DLF’s move to extend the price cut to existing customers in ongoing projects is being seen as particularly significant. Most realty companies have so far refused to lower rates in ongoing projects, unwilling to provide refunds for apartments already sold.
DLF, along with other realty companies, has been battling falling sales and put construction on more than half of its commercial projects on hold due to lack of demand. The company reported a 69% decline in profit in the December quarter.
The Economic Times, February 25, 2009, Page 1
Prices Cut 20-30%, Customers Who Bought At Higher Rates To Get Refunds
Our Bureaus NEW DELHI I CHENNAI
THE COUNTRY’S largest property developer, DLF, has cut home prices by up to a third at its ongoing projects in Chennai and Bangalore, triggering hopes that other big real estate firms will follow its lead to try and boost sagging demand.
Customers who have bought homes at its Garden City project in Chennai and Westend Heights in Bangalore at higher rates will be eligible for a refund, a DLF official said, and indicated that a drop in prices may be in the offing in other cities too.
Rates for the Garden City project—the company has already sold 2,000 of the total 3,500 apartments there—have been cut by 17% to Rs 2,650 per sq ft. DLF has slashed prices by 32% to Rs 1,850 per sq ft for the Bangalore project, where it is building 2,000 homes.
A DLF official said the decision to reduce prices was in response to the changed conditions in the real estate sector because of “unprecedented global events and changes in raw material costs”.
Already, many buyers are said to be queuing up to consider DLF’s offer in Chennai. While one group of buyers claims to have mobilised 600 exit letters, DLF authorities maintain that it is only between 150 and 200 members.
Several analysts have been saying a 30-35% decline in prices is essential to spur demand. Home buying has fallen off sharply since the middle of 2008 because of high property prices and finance costs as well as uncertainties over job security. As sales dried up, credit became expensive and private equity funds vanished, property companies ran into a severe cash crunch. Realty firms have also been under pressure from banks and the government to reduce prices.
While developers have been slow in reacting to the changes, DLF’s decision has the potential to influence the entire market.
“DLF’s bold move will prompt other companies as well to reduce prices,” said Anshul Jain, CEO of property consultancy DTZ India.
DLF’s closest rival, Unitech, which hasn’t launched any new project in the recent past, says it is “still watching the market”.
R Nagaraju, the head of strategy and planning, said the company’s new launches will definitely be at lower price points.
DLF’s move to extend the price cut to existing customers in ongoing projects is being seen as particularly significant. Most realty companies have so far refused to lower rates in ongoing projects, unwilling to provide refunds for apartments already sold.
DLF, along with other realty companies, has been battling falling sales and put construction on more than half of its commercial projects on hold due to lack of demand. The company reported a 69% decline in profit in the December quarter.
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